USPS, Competitors Square Off at Conference

The phrase “You’ve Got Mail!” doesn’t conjure up images
of the U.S. Postal Service in the minds of most Americans. The communications
revolution, which has given us overnight delivery, faxes, and e-mail,
has put pressure on the USPS to improve service, hold down costs
to customers, and reduce its staff of nearly 900,000 mostly unionized
workers.

Murray
Comarow, architect of the U.S. Postal Service, discusses how
the Postal Service's collective bargaining process gives unions
too much power and the USPS too little flexibility.

Those challenges were addressed at a Cato Institute conference,
“Mail @ the Millennium: The Future of Private Postal Service,” held
on December 2. Postmaster General William Henderson conceded that
the USPS is likely to lose its monopoly status within the next decade.
“Deregulation of the postal monopoly is likely to occur, and the
competitive environment will become more dynamic.” He warned, however,
that attempts to privatize the USPS could endanger its ability to
ensure universal mail service. Henderson, who said, “I probably
e-mail as much as any person in America,” contended that the USPS
must become an efficient enterprise to compete. “We need to be so
operationally excellent that it simply won’t matter whether or not
we have a monopoly. No one is standing still and neither can we.”

Concerns were expressed, however, about the way the USPS is attempting to generate more revenue. “Electronic communications are undermining what the postal service does,” said Edward Hudgins, director of regulatory studies at the Cato Institute, “so it is expanding into other areas in search of the new revenue streams that compete with the post office.”

Frederick W. Smith, founder and CEO of Federal Express and a Cato Board
member, argued that the USPS should not “be allowed to diversify
into the private sector and do things that taxpaying entities can
do.” Smith pointed out that the USPS is unfairly exempt from zoning,
customs, and tax laws by which its private-sector competitors must
abide. It has used its monopoly to offer messaging services, bill
processing for private companies, and prepaid telephone cards.

Postmaster
General William J. Henderson discusses the impact of the Postal
Service’s eroding monopoly at Cato’s December 2 conference,
“Mail @ the Millennium: The Future of Private Postal Service.”

Michael J. Critelli, chairman and CEO of Pitney Bowes, warned that
various forms of electronic communications mean that the delivery
of physical mail itself is being challenged. “Physical mail will
ultimately succeed only to the degree that postal authorities can
continue to improve mail delivery systems to ensure that mail is
delivered reliably, securely, and within a time frame that meets
mailer expectations, particularly as new media become universal.”
With that challenge sure to grow in the future, Critelli said, “the
U.S. Postal Service cannot take its formidable customer loyalty
for granted.”

The USPS’s “market grab” is nothing new, said Michael A. Schuyler of the Institute for Research on the Economics of Taxation. More than eight decades ago, the Post Office attempted to gain a monopoly over telegraphs and telephones, which Schuyler compared with the USPS’s contemporary attempt to expand into private markets. James P. Lucier of Prudential Securities added that the USPS’s attempt to grab control of the Internet “is an open invitation to privacy violations, invasive government, and much other mischief besides.”

The overriding theme of the conference was that the USPS must be privatized. Thomas Duesterberg of the Hudson Institute noted that in the past 30 years the real price of a first-class stamp has quadrupled, while the cost of a long-distance telephone call has fallen 88 percent. James Campbell of International Express Carriers pointed out that numerous other countries have already struck down their postal monopolies (Sweden and New Zealand) or are moving toward privatizing their mail delivery services (Germany and the Netherlands) while the USPS continues to resist reforms.

More than 180 people attended the conference, held in the Cato
Institute’s F.A. Hayek Auditorium. The conference, broadcast live
on the World Wide Web, is available for viewing online.
The papers prepared for the conference will be published
as a book later this year.

This article originally appeared in the March/April 1999 edition of Cato Policy Report. Full Issue in PDF (16 pp., 317 Kb)

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